In a reversal from historical experience, Freddie Mac Gold PC securities have recently cheapened versus their Fannie Mae counterparts, which was caused initially by the release of the April prepayment report showing that the differential between Freddie and Fannie speeds was slightly greater than in previous months. Aside from this, analysts point to poor CMO creation due to the lack of outstanding current coupon mortgages.

At current interest rate levels, Golds should be selling over three to four ticks rich to Fannie securities, which compensates for the 10-day differential in the receipt of cash flows, stated a recent report from UBS Warburg. The firm explained that Freddie Golds pay on the 15th of the month (this reflects coupon and principal concentration from the previous month) - resulting in a 14-day delay in receiving payments.

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